23764 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

1This guidance applies to all banks and their 

subsidiaries, bank holding companies and their 

nonbank subsidiaries, savings associations and their 

subsidiaries, and savings and loan holding 

companies and their subsidiaries. 

302–TV. Although the requirements 

were merged under the supporting 

statement, the forms themselves 

remained separate and only shared the 

same OMB control number. Since that 

time, we find that the merging of these 

requirements under one OMB control 

number is ineffective, causing delays in 

submissions to OMB for review, 

especially when the various 

requirements were revised by multiple 

and simultaneously adopted 

Commission actions. 

FCC Form 349 is used to apply for 

authority to construct a new FM 

translator or FM booster broadcast 

station, or to make changes in the 

existing facilities of such stations. 

Form 349’s Newspaper Notice (third 

party disclosure) requirement; 47 CFR 

73.3580: Form 349 also contains a third 

party disclosure requirement, pursuant 

to 47 CFR 73.3580. This rule requires 

stations applying for a new broadcast 

station, or to make major changes to an 

existing station, to give local public 

notice of this filing in a newspaper of 

general circulation in the community in 

which the station is located. This local 

public notice must be completed within 

30 days of the tendering of the 

application. This notice must be 

published at least twice a week for two 

consecutive weeks in a three-week 

period. In addition, a copy of this notice 

must be placed in the station’s public 

inspection file along with the 

application, pursuant to 47 CFR 

73.3527. This recordkeeping 

information collection requirement is 

contained in OMB Control No. 3060– 

0214, which covers 47 CFR 73.3527. 

OMB Control No.: 3060–0837. 

OMB Approval Date: 4/19/2010. 

Expiration Date: 4/30/2013. 

Title: Application for DTV Broadcast 

Station License, FCC Form 302–DTV. 

Form No.: FCC Form 302–DTV. 

Type of Review: Reinstatement 

without change of a previously 

approved collection. 

Number of Respondents/Responses: 

300 respondents; 300 responses. 

Estimated Time per Response: 2 

hours. 

Total Annual Burden: 600 hours. 

Total Annual Cost: $133,800. 

Obligation to Respond: Required to 

obtain or retain benefits. Statutory 

authority for this collection of 

information is contained in Sections 

154(i), 303, and 308 of the 

Communications Act of 1934, as 

amended. 

Nature and Extent of Confidentiality: 

No need for confidentiality required 

with this information collection. 

Needs and Uses: The Commission 

requested and received from the Office 

of Management and Budget (OMB) the 

reinstatement of OMB control number 

3060–0837. In 2008, we merged the 

requirements that were previously 

under this OMB control number into an 

existing information collection, OMB 

control number 3060–0029, Application 

for TV Broadcast Station License, FCC 

Form 302–TV. Although the 

requirements were merged under the 

supporting statement, the forms 

themselves remained separate and only 

shared the same OMB control number. 

Since that time, we find the merging of 

these requirements under one OMB 

control number as ineffective causing 

delays for submission to OMB for 

review especially when the various 

requirements were revised by multiple 

Commission actions. 

Form 302–DTV is used by licensees 

and permittees of Digital TV (‘‘DTV’’) 

broadcast stations to obtain a new or 

modified station license and/or to notify 

the Commission of certain changes in 

the licensed facilities of those stations. 

It may be used: (1) To cover an 

authorized construction permit (or 

auxiliary antenna), provided that the 

facilities have been constructed in 

compliance with the provisions and 

conditions specified on the construction 

permit; or (2) to implement 

modifications to existing licenses as 

permitted by Section 73.1675(c) or 

73.1690(c) of the Commission’s rules. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary, Office of the Secretary, Office of 

Managing Director. 

[FR Doc. 2010–10410 Filed 5–3–10; 8:45 am] 

BILLING CODE 6712–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

FEDERAL RESERVE SYSTEM 

[Docket No. OP–1369] 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

[Docket ID OCC–2010–0016] 

DEPARTMENT OF THE TREASURY 

Office of Thrift Supervision 

[Docket ID OTS–2010–0013] 

Correspondent Concentration Risks 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC); Board of Governors 

of the Federal Reserve System (Board), 

Office of the Comptroller of the 

Currency, Treasury (OCC); and Office of 

Thrift Supervision, Treasury (OTS). 

ACTION: Final guidance. 

DATES: Effective upon publication in the 

Federal Register. 

SUMMARY: The FDIC, Board, OCC, and 

OTS (the Agencies) are issuing final 

guidance on Correspondent 

Concentration Risks (CCR Guidance). 

The CCR Guidance outlines the 

Agencies’ expectations for financial 

institutions to identify, monitor, and 

manage credit and funding 

concentrations to other institutions on a 

standalone and organization-wide basis, 

and to take into account exposures to 

the correspondents’ affiliates, as part of 

their prudent risk management 

practices. Institutions also should be 

aware of their affiliates’ exposures to 

correspondents as well as the 

correspondents’ subsidiaries and 

affiliates. In addition, the CCR Guidance 

addresses the Agencies’ expectations for 

financial institutions to perform 

appropriate due diligence on all credit 

exposures to and funding transactions 

with other financial institutions. 

FOR FURTHER INFORMATION CONTACT: 

FDIC: Beverlea S. Gardner, Senior 

Examination Specialist, Division of 

Supervision and Consumer Protection, 

(202) 898–3640; or Mark G. Flanigan, 

Counsel, Legal Division, (202) 898– 

7426. 

Board: Barbara J. Bouchard, Associate 

Director, (202) 452–3072; or Craig A. 

Luke, Supervisory Financial Analyst, 

Supervisory Guidance and Procedures, 

(202) 452–6409. For users of 

Telecommunications Device for the Deaf 

(‘‘TDD’’) only, contact (202) 263–4869. 

OCC: Kerri R. Corn, Director, Market 

Risk, (202) 874–4364; or Russell E. 

Marchand, Technical Lead Expert, 

Market Risk, (202) 874–4456. 

OTS: Lori J. Quigley, Managing 

Director, Supervision, (202) 906–6265; 

or William J. Magrini, Senior Project 

Manager of Credit Policy, (202) 906– 

5744. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Agencies developed the CCR 

Guidance to outline supervisory 

expectations for financial institutions1

to address correspondent concentration 

risks and to perform appropriate due 

diligence on credit exposures to and 

funding transactions with 

correspondents as part of their prudent 

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Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23765 

2Unless otherwise indicated, references to 

‘‘correspondent’’ include the correspondent’s 

holding company, subsidiaries, and affiliates. 

3For purposes of this guidance, the term ‘‘total 

capital’’ means the total risk-based capital as 

reported for commercial banks and thrifts in the 

Report of Condition and the Thrift Financial Report, 

respectively. 

4 12 CFR part 206. 

5An excess balance account (EBA) is an account 

held at a Federal Reserve Bank that is established 

for purposes of maintaining the excess balances of 

one or more eligible institutions through an agent. 

Under the terms of an EBA agreement, an eligible 

institution is permitted to participate in one EBA 

at a Federal Reserve Bank. 

risk management policies and 

procedures.2 Credit (asset) risk is the 

potential that an obligation will not be 

paid in a timely manner or in full. 

Credit concentration risk arises 

whenever an institution advances or 

commits a significant volume of funds 

to a correspondent, as the advancing 

institution’s assets are at risk of loss if 

the correspondent fails to repay. 

Funding (liability) concentration risk 

arises when an institution depends 

heavily on the liquidity provided by one 

particular correspondent or a limited 

number of correspondents to meet its 

funding needs. Funding concentration 

risk can create an immediate threat to an 

institution’s viability if the advancing 

correspondent suddenly reduces the 

institution’s access to liquid funds. For 

example, a correspondent might 

abruptly limit the availability of liquid 

funding sources as part of a prudent 

program for limiting credit exposure to 

one institution or organization or as 

required by regulation when the 

financial condition of the institution 

declines rapidly. The Agencies realize 

some concentrations arise from the need 

to meet certain business needs or 

purposes, such as maintaining large due 

from balances with a correspondent to 

facilitate account clearing activities. 

However, correspondent concentrations 

represent a lack of diversification that 

management should consider when 

formulating strategic plans and internal 

risk limits. 

The Agencies generally consider 

credit exposures arising from direct and 

indirect obligations in an amount equal 

to or greater than 25 percent of total 

capital3 as concentrations. Depending 

on its size and characteristics, a 

concentration of credit for a financial 

institution may represent a funding 

exposure to the correspondent. While 

the Agencies have not established a 

funding concentration threshold, the 

Agencies have seen instances where 

funding exposures of 5 percent of an 

institution’s total liabilities have posed 

an elevated risk to the recipient, 

particularly when aggregated with other 

similar sized funding concentrations. 

An example of how these interbank 

correspondent risks can become 

concentrated is illustrated below: 

Respondent Institution (RI) has $400 

million in total assets and is well 

capitalized with $40 million (10 

percent) of total capital. RI maintains 

$10 million in its due from account held 

at Correspondent Bank (CB) and sells 

$20 million in unsecured overnight 

Federal funds to CB. These relationships 

collectively result in RI having an 

aggregate risk exposure of 75 percent of 

its total capital to CB. CB, which has $2 

billion in total assets, $1.8 billion in 

total liabilities, and is well capitalized 

with $200 million (10 percent) total 

capital, has a total of 20 respondent 

banks (RB) with the same credit 

exposures to CB as RI has to CB. The 20 

RBs’ $600 million aggregate relationship 

represents one-third (33 percent) of CB’s 

total liabilities. These relationships 

create significant funding risk for CB if 

a few of the RBs withdraw their funds 

in close proximity of each other. 

These relationships also could 

threaten the viability of the 20 RBs. The 

loss of all or a significant portion of the 

RBs’ due from balances and the 

unsecured Federal funds sold to CB 

could deplete a significant portion of 

their capital bases, resulting in multiple 

institution failures. The RBs’ viability 

also could be jeopardized if CB, in turn, 

had sold a significant portion of the 

Federal funds from the RBs to another 

financial institution that abruptly fails. 

In addition, the financial institutions 

that rely on CB for account clearing 

services may find it difficult to quickly 

transfer processing services to another 

provider. 

Although these interbank exposures 

may comply with regulations governing 

individual relationships, collectively 

they pose significant correspondent 

concentration risks that need to be 

monitored and managed consistent with 

the institutions’ overall riskmanagement policies and procedures. 

Therefore, the Agencies published the 

proposed Correspondent Concentration 

Risks Guidance (Proposed Guidance) for 

comment and are now issuing the final 

CCR Guidance after consideration of the 

comments received on the Proposed 

Guidance. 

II. Overview of Public Comments 

The Agencies received 91 unique 

comments on the Proposed Guidance 

primarily from financial institutions and 

industry trade groups. In general, the 

commenters agreed with the 

fundamental principles underlying the 

CCR Guidance, but some responses 

characterized the CCR Guidance as 

excessive, unnecessarily complex, and 

burdensome. A number of institutions 

and industry trade groups also voiced 

concern that the credit and funding 

thresholds in the CCR Guidance would 

be applied as ‘‘hard caps’’ rather than as 

indicators of potentially heightened 

risk. A few commenters noted that a 5 

percent funding threshold was vague 

and lacked sufficient discussion on 

relevant issues, such as the type, term 

and nature of some funding sources. 

Other commenters raised concerns the 

CCR Guidance would effectively amend 

the Board’s Regulation F (Regulation 

F).4

The Agencies requested comment on 

all aspects of the Proposed Guidance. 

The Agencies also specifically requested 

comment on: 

• The appropriateness of aggregating 

all credit and funding exposures that an 

institution or its organization has 

advanced or committed to another 

financial institution or its 

correspondents when calculating 

concentrations, and whether some types 

of advances or commitments should be 

excluded. 

• The types of factors institutions 

should consider when assessing 

correspondents’ financial condition. 

• The need to establish internal limits 

as well as ranges or tolerances for each 

factor being monitored. 

• The types of actions that should be 

considered for contingency planning 

and the timeframes for implementing 

those actions to ensure concentrations 

that meet or exceed organizations’ 

established internal limits, ranges, or 

tolerances are reduced in an orderly 

manner. 

• The operational issues the Agencies 

should consider when issuing the final 

CCR Guidance, such as the single excess 

balance account limitation.5

In response to the Agencies’ specific 

questions, many commenters responded 

that the CCR Guidance needed to be 

flexible, providing financial institutions 

latitude in establishing relationships 

with correspondents that are 

appropriate with the institutions’ 

individual risk management practices 

and business needs. Almost all of the 

commenters asked the Agencies to 

clarify the types of loan participations to 

be included when calculating credit 

exposures. Further, many commenters 

supported using Regulation F’s 

specified factors for assessing 

institutions’ financial condition and 

timeframes for contingency plans. 

Several commenters also suggested 

that the Agencies should exclude 

transactions from the credit and funding 

concentration calculations when these 

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23766 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

6Financial institutions should identify and 

monitor all direct or indirect relationships with 

their correspondents. Institutions should take into 

account exposures of their affiliates to 

correspondents, and how those relationships may 

affect the institution’s exposure. While each 

financial institution is responsible for monitoring 

its own credit and funding exposures, institution 

holding companies should manage the 

organization’s concentration risk on a consolidated 

basis. 

7This guidance applies to all banks and their 

subsidiaries, bank holding companies and their 

nonbank subsidiaries, savings associations and their 

subsidiaries, and savings and loan holding 

companies and their subsidiaries. 

8Unless the context indicates otherwise, 

references to ‘‘correspondent’’ include the 

correspondent’s holding company, subsidiaries, and 

affiliates. A correspondent relationship results 

when a financial organization provides another 

financial organization a variety of deposit, lending, 

or other services. 

transactions would have a nominal 

effect on the calculations, especially 

when the recordkeeping and cost of 

tracking complex exposures outweighed 

the benefit of obtaining this information. 

Many commenters also raised concerns 

that the calculation of credit and 

funding exposures on both a gross and 

net basis created significant additional 

burden on financial institutions. Some 

commenters suggested that the Agencies 

should provide a detailed example of 

how to calculate credit and funding 

exposures. Further, many commenters 

also strongly supported the use of 

multiple excess balance accounts. 

A small number of commenters 

stressed that the Agencies need to apply 

the CCR Guidance uniformly to all 

financial institutions engaged in 

correspondent banking services to 

ensure that smaller scale correspondents 

are not placed at a competitive 

disadvantage to large institutions due to 

a perception of large institutions being 

‘‘too big to fail’’ or having government 

support. In addition, a few commenters 

asked the Agencies to make the CCR 

Guidance effective 90 days after its 

issuance to provide institutions with 

time to implement any additional 

procedures that might be needed to 

ensure compliance. The following 

discussion summarizes how the 

Agencies addressed these issues in the 

CCR Guidance. 

III. Revisions to the CCR Guidance 

The Agencies made a number of 

changes to the Proposed Guidance to 

respond to comments and to provide 

additional clarity in the CCR Guidance. 

Scope of the CCR Guidance 

The Agencies revised the CCR 

Guidance to state that it does not 

supplant or amend Regulation F, but 

provides supervisory guidance on 

correspondent concentration risks. The 

CCR Guidance clarifies that financial 

institutions should consider taking 

actions beyond the minimum 

requirements established in Regulation 

F to identify, monitor, and manage 

correspondent concentration risks in a 

safe and sound manner, especially when 

there are rapid changes in market 

conditions or in a correspondent’s 

financial condition. The revised CCR 

Guidance also specifies that the credit 

and funding thresholds are not ‘‘hard 

caps’’ or firm limits, but are indicators 

that a financial institution has 

concentration risk with a correspondent. 

In addition, the Agencies modified the 

credit concentration threshold 

calculation to reflect positions as a 

percentage of total capital rather than 

tier 1 capital. This revision provides 

consistency with Regulation F. 

Identifying, Calculating, and Monitoring 

Correspondent Concentrations 

The CCR Guidance clarifies that for 

risk management purposes, institutions 

should identify correspondent credit 

and funding concentrations to assist 

management in assessing how 

significant economic events or abrupt 

deterioration in a correspondent’s risk 

profile might affect their financial 

condition.6 In responses to commenters’ 

concerns, the Agencies maintained 

supervisory flexibility, as the CCR 

Guidance clarifies that each financial 

institution should establish appropriate 

internal parameters (such as 

information, ratios, trends or other 

factors) commensurate with the nature, 

size, and risk characteristics of their 

correspondent concentrations. An 

institution’s internal parameters should: 

• Detail the information, ratios, or 

trends that will be reviewed for each 

correspondent on an ongoing basis, 

• Instruct management to conduct 

comprehensive assessments of 

correspondent concentrations that 

consider its internal parameters, and 

• Revise the frequency of 

correspondent concentration reviews 

when appropriate. 

The Agencies also clarified the types 

of loan participations to be included 

when calculating credit exposures. The 

Agencies did not exclude transactions 

that may have a nominal effect from 

either the credit or funding 

concentration calculations to ensure 

consistency with Regulation F. 

The Agencies maintained their 

expectation that, as part of prudent risk 

management, institutions should 

calculate their credit and funding 

exposures with a correspondent on both 

a gross and net basis. While institutions 

already calculate their exposures on a 

net basis, the benefit of management 

being aware of the institution’s overall 

risk position with a correspondent on a 

gross basis outweighs the potential 

burden of conducting a secondary set of 

calculations to ascertain the institution’s 

aggregate exposure. Further, the CCR 

Guidance includes examples on the 

method for calculating credit and 

funding exposures on a standalone and 

on an organization-wide basis for 

illustrative purposes only in response to 

some commenters’ requests for 

examples. 

Other Commenter Issues 

The Agencies appreciate the concern 

of commenters who remarked that 

failure to apply the CCR Guidance 

uniformly to all financial institutions 

engaged in correspondent banking 

services could cause smaller scale 

correspondents to be placed at a 

competitive disadvantage to large 

institutions due to a perception of large 

institutions being ‘‘too big to fail’’ or 

having government support. The 

Agencies are working together to ensure 

that the CCR Guidance is applied 

uniformly to all financial institutions 

engaged in correspondent banking 

services. Further, since institutions 

already have policies and procedures for 

identifying, monitoring, and managing 

credit and funding concentrations on a 

net basis, the Agencies decided not to 

delay the effective date of the CCR 

Guidance. In addition, when the Board 

authorized Federal Reserve Banks to 

offer excess balance accounts, the Board 

stated that it would re-evaluate the 

continuing need for those accounts 

when more normal market functioning 

resumes. 74 FR 25,626 (May 29, 2009). 

The Board will consider these 

comments within the context of such a 

re-evaluation. 

IV. Text of Final CCR Guidance and 

Illustrations in Appendix A and 

Appendix B 

The text of the final CCR Guidance 

and the illustrations in Appendix A and 

Appendix B follows: 

Correspondent Concentration Risks 

A financial institution’s 7 relationship 

with a correspondent 8 may result in 

credit (asset) and funding (liability) 

concentrations. On the asset side, a 

credit concentration represents a 

significant volume of credit exposure 

that a financial institution has advanced 

or committed to a correspondent. On the 

liability side, a funding concentration 

exists when an institution depends on 

one or a few correspondents for a 

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Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23767 

9The Agencies consist of the Federal Deposit 

Insurance Corporation (FDIC), Board of Governors 

of the Federal Reserve System (Board), Office of the 

Comptroller of the Currency, Treasury (OCC), and 

Office of Thrift Supervision, Treasury (OTS) 

(collectively, the Agencies). 

10For purposes of this guidance, the term ‘‘total 

capital’’ means the total risk-based capital as 

reported for commercial banks and thrifts in the 

Report of Condition and the Thrift Financial Report, 

respectively. 

11 12 CFR part 206. All depository institutions 

insured by the FDIC are subject to Regulation F. 

12Financial institutions should identify and 

monitor all direct or indirect relationships with 

their correspondents. Institutions should take into 

account exposures of their affiliates to 

correspondents, and how those relationships may 

affect the institution’s exposure. While each 

financial institution is responsible for monitoring 

its own credit and funding exposures, institution 

holding companies, if any, should manage the 

organization’s concentration risk on a consolidated 

basis. 

13Exclude loan participations purchased without 

recourse from a correspondent, its holding 

company, or an affiliate. 

disproportionate share of its total 

funding. 

The Agencies 9 realize some 

concentrations meet certain business 

needs or purposes, such as a 

concentration arising from the need to 

maintain large ‘‘due from’’ balances to 

facilitate account clearing activities. 

However, correspondent concentrations 

represent a lack of diversification, 

which adds a dimension of risk that 

management should consider when 

formulating strategic plans and internal 

risk limits. 

The Agencies have generally 

considered credit exposures greater than 

25 percent of total capital 10 as 

concentrations. While the Agencies 

have not established a liability 

concentration threshold, the Agencies 

have seen instances where funding 

exposures as low as 5 percent of an 

institution’s total liabilities have posed 

an elevated liquidity risk to the 

recipient institution. 

These levels of credit and funding 

exposures are not firm limits, but 

indicate an institution has concentration 

risk with a correspondent. Such 

relationships warrant robust risk 

management practices, particularly 

when aggregated with other similarly 

sized funding concentrations, in 

addition to meeting the minimum 

regulatory requirements specified in 

applicable regulations. Financial 

institutions should identify, monitor, 

and manage both asset and liability 

correspondent concentrations and 

implement procedures to perform 

appropriate due diligence on all credit 

exposures to and funding transactions 

with correspondents, as part of their 

overall risk management policies and 

procedures. 

This guidance does not supplant or 

amend applicable regulations such as 

the Board’s Limitations on Interbank 

Liabilities (Regulation F).11 This 

guidance clarifies that financial 

institutions should consider taking 

actions beyond the minimum 

requirements established in Regulation 

F to identify, monitor, and manage 

correspondent concentration risks, 

especially when there are rapid changes 

in market conditions or in a 

correspondent’s financial condition, in 

order to maintain risk management 

practices consistent with safe and sound 

operations. 

Identifying Correspondent 

Concentrations 

Institutions should implement 

procedures for identifying 

correspondent concentrations. For 

prudent risk management purposes, 

these procedures should encompass the 

totality of the institutions’ aggregate 

credit and funding concentrations to 

each correspondent on a standalone 

basis, as well as taking into account 

exposures to each correspondent 

organization as a whole.12 In addition, 

the institution should be aware of 

exposures of its affiliates to the 

correspondent and its affiliates. 

Credit Concentrations 

Credit concentrations can arise from a 

variety of assets and activities. For 

example, an institution could have due 

from bank accounts, Federal funds sold 

on a principal basis, and direct or 

indirect loans to or investments in a 

correspondent. In identifying credit 

concentrations for risk management 

purposes, institutions should aggregate 

all exposures, including, but not limited 

to: 

• Due from bank accounts (demand 

deposit accounts (DDA) and certificates 

of deposit (CD)), 

• Federal funds sold on a principal 

basis, 

• The over-collateralized amount on 

repurchase agreements, 

• The under-collateralized portion of 

reverse repurchase agreements, 

• Net current credit exposure on 

derivatives contracts, 

• Unrealized gains on unsettled 

securities transactions, 

• Direct or indirect loans to or for the 

benefit of the correspondent,13 and 

• Investments, such as trust preferred 

securities, subordinated debt, and stock 

purchases, in the correspondent. 

Funding Concentrations 

Depending on its size and 

characteristics, a concentration of credit 

for a financial institution may be a 

funding exposure for the correspondent. 

The primary risk of a funding 

concentration is that an institution will 

have to replace those advances on short 

notice. This risk may be more 

pronounced if the funds are credit 

sensitive, or if the financial condition of 

the party advancing the funds has 

deteriorated. 

The percentage of liabilities or other 

measurements that may constitute a 

concentration of funding is likely to 

vary depending on the type and 

maturity of the funding, and the 

structure of the recipient’s sources of 

funds. For example, a concentration in 

overnight unsecured funding from one 

source might raise different 

concentration issues and concerns than 

unsecured term funding, assuming 

compliance with covenants and 

diversification with short and long-term 

maturities. Similarly, concerns arising 

from concentrations in long-term 

unsecured funding typically increase as 

these instruments near maturity. 

Calculating Credit and Funding 

Concentrations 

When identifying credit and funding 

concentrations for risk management 

purposes, institutions should calculate 

both gross and net exposures to the 

correspondent on a standalone basis and 

on a correspondent organization-wide 

basis as part of their prudent risk 

management practices. Exposures are 

reduced to net positions to the extent 

that the transactions are secured by the 

net realizable proceeds from readily 

marketable collateral or are covered by 

valid and enforceable netting 

agreements. Appendix A, Calculating 

Correspondent Exposures, contains 

examples, which are provided for 

illustrative purposes only. 

Monitoring Correspondent 

Relationships 

Prudent management of 

correspondent concentration risks 

includes establishing and maintaining 

written policies and procedures to 

prevent excessive exposure to any 

correspondent in relation to the 

correspondent’s financial condition. For 

risk management purposes, institutions’ 

procedures and frequency for 

monitoring correspondent relationships 

may be more or less aggressive 

depending on the nature, size, and risk 

of the exposure. 

In monitoring correspondent 

relationships for risk-management 

purposes, institutions should specify 

internal parameters relative to what 

information, ratios, or trends will be 

reviewed for each correspondent on an 

ongoing basis. In addition to a 

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correspondent’s capital, level of 

problem loans, and earnings, 

institutions may want to monitor other 

factors, which could include, but are not 

limited to: 

• Deteriorating trends in capital or 

asset quality. 

• Reaching certain target ratios 

established by management, e.g., 

aggregate of nonaccrual and past due 

loans and leases as a percentage of gross 

loans and leases. 

• Increasing level of other real estate 

owned. 

• Attaining internally specified levels 

of volatile funding sources such as large 

CDs or brokered deposits. 

• Experiencing a downgrade in its 

credit rating, if publicly traded. 

• Being placed under a public 

enforcement action. 

For prudent risk management 

purposes, institutions should 

implement procedures that ensure 

ongoing, timely reviews of 

correspondent relationships. 

Institutions should use these reviews to 

conduct comprehensive assessments 

that consider their internal parameters 

and are commensurate with the nature, 

size, and risk of their exposure. 

Institutions should increase the 

frequency of their internal reviews 

when appropriate, as even well 

capitalized institutions can experience 

rapid deterioration in their financial 

condition, especially in economic 

downturns. 

Institutions’ procedures also should 

establish documentation requirements 

for the reviews conducted. In addition, 

the procedures should specify when 

relationships that meet or exceed 

internal criteria are to be brought to the 

attention of the board of directors or the 

appropriate management committee. 

Managing Correspondent 

Concentrations 

Institutions should establish prudent 

internal concentration limits, as well as 

ranges or tolerances for each factor 

being monitored for each correspondent. 

Institutions should develop plans for 

managing risk when these internal 

limits, ranges or tolerances are met or 

exceeded, either on an individual or 

collective basis. Contingency plans 

should provide a variety of actions that 

can be considered relative to changes in 

the correspondent’s financial condition. 

However, contingency plans should not 

rely on temporary deposit insurance 

programs for mitigating concentration 

risk. 

Prudent risk management of 

correspondent concentration risks 

should include procedures that provide 

for orderly reductions of correspondent 

concentrations that exceed internal 

parameters over a reasonable timeframe 

that is commensurate with the size, 

type, and volatility of the risk in the 

exposure. Such actions could include, 

but are not limited to: 

• Reducing the volume of 

uncollateralized/uninsured funds. 

• Transferring excess funds to other 

correspondents after conducting 

appropriate reviews of their financial 

condition. 

• Requiring the correspondent to 

serve as agent rather than as principal 

for Federal funds sold. 

• Establishing limits on asset and 

liability purchases from and 

investments in correspondents. 

• Specifying reasonable timeframes to 

meet targeted reduction goals for 

different types of exposures. 

Examiners will review correspondent 

relationships during examinations to 

ascertain whether an institution’s 

policies and procedures appropriately 

identify and monitor correspondent 

concentrations. Examiners also will 

review the adequacy and reasonableness 

of institutions’ contingency plans to 

manage correspondent concentrations. 

Performing Appropriate Due Diligence 

Financial institutions that maintain 

credit exposures in or provide funding 

to other financial institutions should 

have effective risk management 

programs for these activities. For this 

purpose, credit or funding exposures 

may include, but are not limited to, due 

from bank accounts, Federal funds sold 

as principal, direct or indirect loans 

(including participations and 

syndications), and trust preferred 

securities, subordinated debt, and stock 

purchases of the correspondent. 

An institution that maintains or 

contemplates entering into any credit or 

funding transactions with another 

financial institution should have written 

investment, lending, and funding 

policies and procedures, including 

appropriate limits, that govern these 

activities. In addition, these procedures 

should ensure the institution conducts 

an independent analysis of credit 

transactions prior to committing to 

engage in the transactions. The terms for 

all such credit and funding transactions 

should strictly be on an arm’s length 

basis, conform to sound investment, 

lending, and funding practices, and 

avoid potential conflicts of interest. 

Appendix A 

Calculating Respondent Credit Exposures on 

an Organization-Wide Basis 

Respondent Bank’s Gross Credit Exposure to a Correspondent, its Holding Company and Affiliates 

50,000,000 Due from DDA with correspondent. 

1,000,000 Due from DDA with correspondent’s two affiliated insured depository institutions (IDIs). 

1,000,000 CDs issued by correspondent bank. 

500,000 CDs issued by one of correspondent’s two affiliated IDIs. 

51,500,000 Federal funds sold to correspondent on a principal basis. 

2,500,000 Federal funds sold to correspondent’s affiliated IDIs on a principal basis. 

3,750,000 Reverse Repurchase agreements. 

250,000 Net current credit exposure on derivatives.1

4,500,000 Direct and indirect loans to or for benefit of a correspondent, its holding company, or affiliates. 

2,500,000 Investments in the correspondent, its holding company, or affiliates 

117,500,000 Gross Credit Exposure. 

100,000,000 Total Capital. 

118% Gross Credit Concentration. 

Respondent Bank’s Net Credit Exposure to a Correspondent, its Holding Company and Affiliates 

17,850,000 Due from DDA (less checks/cash not available for withdrawal & federal deposit insurance (FDI)).2

500,000 Due from DDA with correspondent’s two affiliated IDIs (less FDI).2

750,000 CDs issued by correspondent bank (less FDI). 

250,000 CDs issued by one of correspondent’s two affiliated IDIs (less FDI). 

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Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23769 

51,500,000 Federal funds sold on a principal basis. 

2,500,000 Federal funds sold to correspondent’s affiliated IDIs on a principal basis. 

100,000 Under-collateralized amount on reverse repurchase agreements (less the current market value of government securities or

readily marketable collateral pledged).3

50,000 Uncollateralized net current derivative position.1

4,500,000 Direct and indirect loans to or for benefit of a correspondent, its holding company, or affiliates. 

2,500,000 Investments in the correspondent, its holding company, or affiliates. 

80,500,000 Net Credit Exposure. 

100,000,000 Total Capital. 

81% Net Credit Concentration. 

Note: Respondent Bank has $1 billion in Total Assets, 10% Total Capital, and 90% Total Liabilities and Correspondent Bank has $1.5 billion in Total Assets, 10% Total Capital, and 90% Total Liabilities. 

Calculating Correspondent Funding 

Exposures on an Organization-Wide Basis 

Correspondent Bank’s Gross Funding Exposure to a Respondent Bank 

50,000,000 Due to DDA with respondent. 

1,000,000 Correspondent’s two affiliated IDIs’ Due to DDA with respondent. 

1,000,000 CDs sold to respondent bank. 

500,000 CDs sold to respondent from one of correspondent’s two affiliated IDIs. 

51,500,000 Federal funds purchased from respondent on a principal basis. 

2,500,000 Federal funds sold to correspondent’s affiliated IDIs on a principal basis. 

1,000,000 Repurchase Agreements. 

107,500,000 Gross Funding Exposure. 

1,350,000,000 Total Liabilities. 

7.96% Gross Funding Concentration. 

Correspondent Bank’s Net Funding Exposure to a Respondent, its Holding Company and Affiliates 

17,850,000 Due to DDA with respondent (less checks and cash not available for withdrawal and FDI).2

500,000 Correspondent’s two affiliated IDIs’ Due to DDA with respondent (less FDI).2

750,000 CDs sold to correspondent (less FDI). 

250,000 One of correspondent’s two affiliated IDIs’ CDs sold to respondent (less FDI).2

51,500,000 Federal funds purchased from respondent on a principal basis. 

2,500,000 Federal funds sold to correspondent’s affiliated IDIs on a principal basis. 

150,000 Under-collateralized amount of repurchase agreements relative to the current market value of government securities or 

readily marketable collateral pledged.3

73,500,000 Net Funding Exposure. 

1,350,000,000 Total Liabilities. 

5.44% Net Funding Concentration. 

1There are 5 derivative contracts with a mark-to-market fair value position as follows: Contract 1 (100), Contract 2 +400, Contract 3 (50), 

Contract 4 +150, and Contract 5 (150). Collateral is 200, resulting in an uncollateralized position of 50. 2While temporary deposit insurance programs may provide certain transaction accounts higher levels of federal deposit insurance coverage, institutions should not rely on such programs for mitigating concentration risk. 3 Government securities means obligations of, or obligations fully guaranteed as to principal and interest by, the U.S. government or any 

department, agency, bureau, board, commission, or establishment of the United States, or any corporation wholly owned, directly or indirectly, by the United States. 

Appendix B 

Calculating Respondent Credit Exposures 

on a Correspondent Only Basis 

RESPONDENT BANK’S GROSS CREDIT EXPOSURE TO A CORRESPONDENT

50,000,000 Due from DDA with correspondent. 

0 Due from DDA with correspondent’s two affiliated insured depository institutions (IDIs). 

1,000,000 CDs issued by correspondent bank. 

0 CDs issued by one of correspondent’s two affiliated IDIs. 

51,500,000 Federal funds sold to correspondent on a principal basis. 

0 Federal funds sold to correspondent’s affiliated IDIs on a principal basis. 

3,750,000 Reverse Repurchase agreements. 

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23770 Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 

250,000 Net current credit exposure on derivatives.1

4,500,000 Direct and indirect loans to or for benefit of a correspondent, its holding company, or affiliates. 

2,500,000 Investments in the correspondent, its holding company, or affiliates. 

113,500,000 Gross Credit Exposure. 

100,000,000 Total Capital. 

114% Gross Credit Concentration. 

Respondent Bank’s Net Credit Exposure to a Correspondent 

17,850,000 Due from DDA (less checks/cash not available for withdrawal and federal deposit insurance (FDI)).2

0 Due from DDA with correspondent’s two affiliated IDIs (less FDI).2

750,000 CDs issued by correspondent bank (less FDI). 

0 CDs issued by one of correspondent’s two affiliated IDIs (less FDI). 

51,500,000 Federal funds sold on a principal basis. 

0 Federal funds sold to correspondent’s affiliated IDIs on a principal basis. 

100,000 Under-collateralized amount on reverse repurchase agreements (less the current market value of government securities or

readily marketable collateral pledged).3

50,000 Uncollateralized net current derivative position.1

4,500,000 Direct and indirect loans to or for benefit of a correspondent, its holding company, or affiliates. 

2,500,000 Investments in the correspondent, its holding company, or affiliates. 

77,250,000 Net Credit Exposure. 

100,000,000 Total Capital. 

77% Net Credit Concentration. 

Note: Respondent Bank has $1 billion in 

Total Assets, 10% Total Capital, and 90% 

Total Liabilities and Correspondent Bank has 

$1.5 billion in Total Assets, 10% Total 

Capital, and 90% Total Liabilities. 

Calculating Respondent Funding 

Exposures on a Correspondent Only Basis 

Correspondent Bank’s Gross Funding Exposure to a Respondent 

50,000,000 Due to DDA with respondent. 

0 Correspondent’s two affiliated IDIs’ Due to DDA with respondent. 

1,000,000 CDs sold to respondent bank. 

0 CDs sold to respondent from one of correspondent’s two affiliated IDIs. 

51,500,000 Federal funds purchased from respondent on a principal basis. 

0 Federal funds sold to correspondent’s affiliated IDIs on a principal basis. 

1,000,000 Repurchase agreements. 

103,500,000 Gross Funding Exposure. 

1,350,000,000 Total Liabilities. 

7.67% Gross Funding Concentration. 

Correspondent Bank’s Net Funding Exposure to a Respondent 

17,850,000 Due to DDA with respondent (less checks and cash not available for withdrawal and FDI).2

0 Correspondent’s two affiliated IDIs’ Due to DDA with respondent (less FDI).2

750,000 CDs sold to correspondent (less FDI). 

0 One of correspondent’s two affiliated IDIs’ CDs sold to respondent (less FDI).2

51,500,000 Federal funds purchased from respondent on a principal basis. 

0 Federal funds sold to correspondent’s affiliated IDIs on a principal basis. 

100,000 Under-collateralized amount on repurchase agreements (less the current market value of government securities or readily

marketable collateral pledged).3

70,200,000 Net Funding Exposure. 

1,350,000,000 Total Liabilities. 

5.20% Net Funding Concentration. 

1There are 5 derivative contracts with a mark-to-market fair value position as follows: Contract 1 (100), Contract 2 +400, Contract 3 (50), 

Contract 4 +150, and Contract 5 (150). Collateral is 200, resulting in an uncollateralized position of 50. 2While temporary deposit insurance programs may provide certain transaction accounts higher levels of federal deposit insurance coverage, institutions should not rely on such programs for mitigating concentration risk. 3 Government securities means obligations of, or obligations fully guaranteed as to principal and interest by, the U.S. government or any 

department, agency, bureau, board, commission, or establishment of the United States, or any corporation wholly owned, directly or indirectly, by the United States. 

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Federal Register / Vol. 75, No. 85 / Tuesday, May 4, 2010 / Notices 23771 

Dated at Washington, DC, the 27th day of 

April 2010. 

By order of the Federal Deposit Insurance 

Corporation. 

Robert E. Feldman, 

Executive Secretary. 

By order of the Board of Governors of the 

Federal Reserve System. 

Jennifer J. Johnson, 

Secretary of the Board. 

John C. Dugan, 

Comptroller of the Currency. 

Dated: April 9, 2010. 

By the Office of Thrift Supervision. 

John E. Bowman, 

Acting Director. 

[FR Doc. 2010–10382 Filed 5–3–10; 8:45 am] 

BILLING CODE 6714–01–P, 6210–01–P, 4810–33–P, 

6720–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Health Resources and Services 

Administration 

Agency Information Collection 

Activities: Proposed Collection: 

Comment Request 

In compliance with the requirement 

for opportunity for public comment on 

proposed data collection projects 

(section 3506(c)(2)(A) of Title 44, United 

States Code, as amended by the 

Paperwork Reduction Act of 1995, Pub. 

L. 104–13), the Health Resources and 

Services Administration (HRSA) 

publishes periodic summaries of 

proposed projects being developed for 

submission to the Office of Management 

and Budget (OMB) under the Paperwork 

Reduction Act of 1995. To request more 

information on the proposed project or 

to obtain a copy of the data collection 

plans and draft instruments, e-mail 

paperwork@hrsa.gov or call the HRSA 

Reports Clearance Officer at (301) 443– 

1129. 

Comments are invited on: (a) The 

proposed collection of information for 

the proper performance of the functions 

of the agency; (b) the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information; (c) 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; and (d) ways to minimize the 

burden of the collection of information 

on respondents, including through the 

use of automated collection techniques 

or other forms of information 

technology. 

Proposed Project: Children’s Hospital 

Graduate Medical Education Payment 

Program (CHGME PP) Annual Report 

(OMB No. 0915–0313)—Extension 

The CHGME PP was enacted by 

Public Law 106–129 to provide Federal 

support for graduate medical education 

(GME) to freestanding children’s 

hospitals, similar to Medicare GME 

support received by other, nonchildren’s hospitals. The legislation 

indicates that eligible children’s 

hospitals will receive payments for both 

direct and indirect medical education. 

Direct payments are designed to offset 

the expenses associated with operating 

approved graduate medical residency 

training programs and indirect 

payments are designed to compensate 

hospitals for expenses associated with 

the treatment of more severely ill 

patients and the additional costs 

relating to teaching residents in such 

programs. 

The CHGME PP program was 

reauthorized for a period of five years in 

October 2006 by Public Law 109–307. 

The reauthorizing legislation requires 

that participating children’s hospitals 

provide information about their 

residency training programs in an 

annual report that will be an addendum 

to the hospitals’ annual applications for 

funds. 

Data are required to be collected on 

the (1) Types of training programs that 

the hospital provided for residents such 

as general pediatrics, internal medicine/ 

pediatrics, and pediatric subspecialties 

including both medical subspecialties 

certified and non-medical 

subspecialties; (2) the number of 

training positions for residents, the 

number of such positions recruited to 

fill, and the number of positions filled; 

(3) the types of training that the hospital 

provided for residents related to the 

health care needs of difference 

populations such as children who are 

underserved for reasons of family 

income or geographic location, 

including rural and urban areas; (4) 

changes in residency training including 

changes in curricula, training 

experiences, and types of training 

programs, and benefits that have 

resulted from such changes and changes 

for purposed of training residents in the 

measurement and improvement and the 

quality and safety of patient care; (5) 

and the numbers of residents 

(disaggregated by specialty and 

subspecialty) who completed training in 

the academic year and care for children 

within the borders of the service area of 

the hospital or within the borders of the 

State in which the hospital is located. 

The estimated annual burden is as 

follows: 

Form 

name 

Number 

of respondents 

Responses 

per 

respondent 

Total number of responses 

Hours per 

response 

Total burden hours 

Wage 

rate 

($/hr.) 

Total 

hour 

cost 

Screening Instrument ...............................

(HRSA 100–1) .......................................... 57 1 57 10.0 570.0 56.38 32,136.60 

Annual Report: Hospital and ProgramLevel Information ..................................

(HRSA 100–2 and 3) ............................... 57 1 57 74.8 4263.6 56.38 240,381.76 

Total .................................................. 57 .................... 57 84.8 4833.6 56.38 272,518.36 

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